Chinese growth results in unprecedented demand for bulk carrier tonnage

“Ten years ago, China imported about 37.4 million tonnes of iron ore. Five years ago, this figure had risen to 55.4 million tonnes, a 48% increase. In 2004, we estimate that Chinese imports will come in at about 203 million tonnes – in other words, an increase of 147.6 million tonnes, or 266%! Close to two-thirds of this increase has occurred just in the last two years. No wonder bulk carrier freight rates are so high.”
(Fairplay, January 6, 2005)

Ore imports have passed the 200 million tonne level and are still growing substantially. An analyst recently forecasted that 375 million tonnes would be imported by 2010. The supply of and demand for bulk carrier tonnage is far from balanced, as can be witnessed by the Capesize prices. At the year-end 2004, you would have had to pay some USD 56 million for a new Capesize -
a 170 000 dwt bulk carrier - whereas a second-hand one was selling for USD 64.5 million.
The iron ore mines of the world are being worked to their limits, and congestion – when both loading and unloading iron ore - results in long waits for vessels. At today’s rates, this is more a problem of inefficiency than one of shipowner revenues.
The global demand for grain, coal and bulk cargoes also remains high – all in all, this means that the dry-bulk market will remain brisk for the foreseeable future. From our point of view, this puts a heavy strain on every aspect of the safe operation of bulk shipping. There are more elderly vessels trading now that scrapping has virtually come to a standstill. The current global order book for bulk carriers is almost 50% of the existing tonnage – the new and added capacity will better balance the market, but will eventually result in more port congestion.
We have a vast base of accumulated bulk carrier knowledge – in daily talk called experience. The DNV-classed fleet of bulk carriers is large and none of our competitors has as many vessels to their class. This underlines our long-term commitment to bulk carrier owners and operators to keep the vessels available for trade while not compromising safety. To revert to the many aspects of China – we have more than 300 employees in China at 18 locations and have the largest classification approbation centre in the region at Shanghai.

Ulf Freudendahl
DNV Business Director,
Bulk Carriers(Ulf.Freudendahl@dnv.com)

Date: 08 February 2008